South Dakota has no way to tax lithium extracted from the Black Hills.
That’s the subject of a new paper called "Taxation of Precious Metals and Other Extracted Materials" from a nonpartisan group that works for the state legislature.
The state taxes coal, oil and gas, uranium and thorium at 4.5 percent. There’s an additional conservation tax on those minerals. There’s also a severance tax on gold and silver.
Lithium is a metal that’s growing in demand. But as the state sees an increase in interest for that mineral—there’s no way for the state to raise revenue off the extraction.
Will Steward, a research analyst for the Legislative Research Council, said metals not specifically mentioned in state law are untaxed.
“It doesn’t fit under any definition of energy mineral or precious metal," Steward said. "So, if it's severed in South Dakota, there’s no chapter in our code that would tax the severance of those things.”
In the Black Hills, lithium is in a hard rock called spodumene, which is found in pegmatites. State law only requires a permit to pegmatites, which is classified like gravel and sand. That permit is $100 a year for each mine site.
Efforts to tax lithium stalled in the last legislative session.
Nearby states of Montana, Minnesota and Wyoming have a catchall mining tax.
Republican House Majority Leader Will Mortenson said it’s important all metals are tax equally.
“Having a consistent and broad approach makes the most sense to me,” Mortenson said. “I was frankly surprised to learn that we tax based on specific minerals as opposed to all minerals that are mined out of our lands.”
In the last three years, the number of new mining claims in the Black Hills have increased 18-fold, from 230 in 2019 to 4,248 in 2022.
Last month, Midwest Lithium announced intentions to drill exploration holes near Keystone.
